The Pound to Euro exchange rate remained relatively stable on Thursday, with the Pound trading at €1.1873. This was largely unchanged from the previous day, as the Bank of England decided to keep interest rates at a sixteen-year high. Despite the UK’s inflation easing to 2%, the central bank remained cautious due to high service price inflation.
Kathleen Brooks, Research Director at XTB, suggested that there could be a rate cut in August, as the BoE acknowledged progress in reaching the 2% inflation target. This news led to a decrease in investor confidence in the Pound, causing it to weaken against the US Dollar.
On the other hand, the Euro struggled to gain support after Germany’s producer price index fell by 2.2% in May, missing market expectations. This decline raised concerns about wider inflation in the Eurozone, leading to speculation about potential monetary policy changes.
Looking ahead, the focus will be on the UK’s retail sales data for May, which is expected to show a slight rebound. Additionally, preliminary PMIs for both the UK and Eurozone are set to be released, with forecasts suggesting an increase in activity. If these indicators meet expectations, both currencies could strengthen in the coming months.
Overall, market sentiment remains cautious as investors await further economic data releases to gauge the direction of the Pound to Euro exchange rate.